Census 2016 to illustrate how Canadians earn, or struggle to earn, a living

By Jordan Press

THE CANADIAN PRESS

OTTAWA _ Statistics Canada will offer a detailed look Wednesday at the size of the gap between the country’s top income earners and those toiling at the bottom a chasm that appears to be narrowing but remains far too wide for many to easily cross.

The income data, collected as part of last year’s census, will offer an important signpost for the Trudeau government, which is looking for validation of its efforts to date to help reduce inequality and lend moral support to those in the lower income brackets.

The numbers are expected to show a 10 per cent increase in median incomes for families and single people over the last decade, suggesting a medium-term trend of positive economic news.

More broadly, however, the gulf between rich and poor in Canada remains a wide one.

The gap between the poverty line and the “one per cent” was at its widest in recent history during the 1980s and 1990s, when those at the top earned about 14 times than the average Canadian. That gap did narrow somewhat over the past decade; research shows the very wealthy now earn about 10 times more than the average worker.

In 2015, the top 10 per cent of earners pulled in $153,600 in wages, or “market income” about three times the median market income of $52,700, and roughly the total of the median incomes for the bottom 60 per cent of Canadians.

“There’s less confidence in social mobility,” said Aaron Wudrick, federal director of the Canadian Taxpayers Federation.

“There’s an increasing sense that the rules are rigged and the deck is stacked.”

That same sentiment helped propel Donald Trump to the White House and helped drive Great Britain out of the European Union. Prime Minister Justin Trudeau has hinted that Liberal social policy is designed in part to counter it in Canada.

The income data is the latest in a year-long series of data dumps from Statistics Canada as it paints the country’s most recent five-year census portrait. The first broad strokes began in February with population estimates, followed by details about age and gender, linguistic diversity and evolving family dynamics.

Details about trends in immigration, Indigenous Peoples, education and labour are due later this fall, which is when Statistics Canada will draw a more direct connection between various population segments and income levels.

This week’s release is based entirely on tax data from the Canada Revenue Agency, a sign of things to come. The idea is to one day use a variety of similar administrative data sources to build a digital portrait, all but eliminating the need to fill out a questionnaire.

Statistics Canada already makes tax filer data publicly available, which provides a fairly good idea of what the agency is likely to reveal Wednesday.

Doug Norris, chief demographer at Environics Analytics, said the median income of families and unattached individuals was $63,400 in 2015, an increase of about 10 per cent since 2005, once adjusted for inflation.

The changes in income reflect the shifting structure of the family dynamic: Among other things, Canadians are staying in school, living at home longer and delaying marriage and kids to keep their incomes on an upward trajectory.

Norris said the data will likely show women’s incomes increasing by about 18 per cent compared to a five per cent jump for men, with more women entering the labour force and male workers reeling from the 2009 recession.

There’s also likely to be signs of income gains for lone-parent households evidence that the traditional image of the single parent as a mother under age 25 with limited education and limited support is slowing being eroded.

“That’s not the typical profile of the single mother anymore,” said Nora Spinks, CEO of the Vanier Institute of the Family, pointing to previous census data showing a rise in the number of women over 40 leading lone-parent homes.

Those older women tend to be better off financially because they are deeper in their careers, Spinks said, adding that fathers who are not partnered with mothers are more likely to be paying child support or contributing to household finances either directly with cash or indirectly through in-kind help.

The gender wage gap still remains Statistics Canada will reveal Wednesday how wide it was last year.

The biggest income gains provincially over the past five years are mostly likely to be in Alberta, Saskatchewan and Newfoundland and Labrador, the result of a boom in commodity prices that began to fade about three years ago.

The Liberal government’s first budget offered extended employment insurance benefits to those hard-hit regions, anticipating costs of $827.4 million between April 2016 and March 2019.

As of early July, however, government coffers had doled out about $1.3 billion in additional benefits for some 317,261 claimants.

5 Reasons Canada’s Housing Market Won’t Crash

Jason Phillips | Motley Fool

Much has been made over the past decade of Canada’s rising household debt, which is now at levels similar to those in the United States prior to the 2008-09 Financial Crisis.

With housing prices in Toronto up more than 30% over the past 12 months, and Vancouver prices having been inflated for several years, many are wondering: now that the Bank of Canada has raised interest rates twice in the last three months, will it be enough to topple the Canadian housing market?

There are five very important reasons why investors should not expect a housing correction in the Canadian market to be of nearly the same magnitude as the one experienced in the United States 10 years ago.

Reason #1: The United States incentivizes home ownership

In the U.S., federal policy actively encourages home ownership, whereas in Canada, policies are designed to encourage access to housing, but they do not explicitly favour home ownership over renting or leasing a property.

It seems then only natural to suggest that creating incentives for home ownership (like, for example, allowing mortgage interest to be tax deductible in the U.S.) would be more likely to create an environment ripe for a housing bubble.

Reason #2: Canada’s housing market is directly backed by the Federal government

In the U.S., Fannie Mae and Freddie Mac are responsible for providing guarantees on mortgage-backed securities and providing overall stability to the housing system.

At the time of the Financial Crisis, Fannie Mae and Freddie Mac were privately owned, with the “implicit” backing of the Federal government. Yet, when push came to shove, investors learned the hard way the difference between an implicit guarantee and direct backing.

By comparison, the Canadian equivalent responsible for providing insurance and stability, is the Canada Mortgage and Housing Corporation (CMHC) — a Crown corporation directly owned by the Canadian Federal government.

Reason #3: Canada does not allow non-recourse mortgages

In Canada, mortgages are typically “full-recourse” loans, meaning the borrower continues to be responsible for repaying the loan in the event of a foreclosure, which effectively incentivizes the borrower to do everything in their power to avoid foreclosing and losing the property.

Meanwhile, many U.S. states employ “non-recourse” mortgages, which, in the event of a foreclosure, allow the borrower to walk away from their homes, leaving the lender with no-recourse besides taking over ownership of the property.

It’s easy to see how non-recourse mortgages can exacerbate the problem of homeowners defaulting on their payments.

Reason #4: Canada has tighter restrictions on mortgage insurance

Canadian legislation prohibits lenders from issuing mortgages without loan insurance if the loan is greater than 80% of the value of the property.

Insurance which is purchased from the CMHC covers the entire amount of the loan for the entire life of the mortgage.

In the U.S., it is a little different; while many lenders will require insurance, they are not legally obligated to do so.

Moreover, in the U.S., loan insurance is “partial,” often covering 20-30% of the loan amount and is cancelled as soon as the value of the loan falls below 78% of the purchase price.

Reason #5: The relative absence of a subprime market in Canada

Sub-prime mortgages are made to riskier borrowers, such as those with a weaker credit history or less stable income.

In the U.S., before the housing crisis, the sub-prime mortgage market peaked at 23.5% of all mortgage originations.

By contrast, in Canada today, the sub-prime mortgage market, which includes Home Capital Group Inc. (TSX:HCG), accounts for less than 5% of originations, making the market significantly less risky.

Conclusion

Regardless of how you look at it, rising interest rates are not a good omen for the future of Canada’s housing market. And while delinquencies today are well below historical averages, that may actually be confirming evidence that a bubble is present.

Current and prospective homeowners should approach the market with caution. Those warning that the “sky is falling” and that the environment is similar to the situation in the U.S. 10 years ago, ought to think a bit more Foolishly.

Ability to afford a home declines in Canada

Desjardins Economic Studies have released their most recent Desjardins Affordability Index (DAI).

The DAI is calculated by dividing the average household disposable income and the income required to obtain a mortgage on a home at the average price.

In Canada, the financial capacity of households to acquire property deteriorated in the first quarter of 2017 compared to the previous quarter.

The attached PDF covers specific details about the DAI in communities across the country.

Highlights

In Ontario household financial capacity to buy a property weakened the most. The DAI contracted in the majority of markets during the first quarter of 2017. The largest decreases were seen in Windsor and in Kitchener-Cambridge-Waterloo.

Ontario

Windsor:   – 11.9

Kitchener-Cambridge-Waterloo:  – 9.4

Toronto:    – 7.2

Hamilton:  – 7.1

London:   – 6.6

St. Catharines–Niagara:    -6.2

In Calgary, access to property dwindled due to lower household after-tax income. In contrast, the index improved in Vancouver, as the average sales prices slipped 2.4%.

Alberta

Calgary:  -2.2

Edmonton:  +2.7

British Columbia

Vancouver:  +2.3

Manitoba

Winnipeg:   – 2.4

 

Amount Canadians owe compared with income ticks lower but still near record high

The amount Canadians owe compared with their income ticked lower in the first quarter but remained near record levels as mortgage debt continued to climb.

Statistics Canada said Wednesday, June 14, 2017 the amount of household credit market debt as a proportion of household disposable income slipped to 166.9 per cent in the quarter compared with 167.2 per cent in the fourth quarter of last year.

That means that for every dollar of disposable income, Canadians owe about $1.67.

Economists and policy-makers, including the Bank of Canada, have raised concerns about household debt and see it as a key risk to the economy.

Low interest rates have fuelled the growth in household debt in recent years, but the central bank has started dropping hints that may be changing as the economy has improved.

Canadians should be thinking about what their finances would look like were interest rates to rise, Bank of Canada governor Stephen Poloz said this week.

Royal Bank economist Laura Cooper said the cost of servicing debt has remained broadly unchanged in recent years, but households’ sensitivity to rate hikes is likely greater now than when rates have risen in the past.

“Non-mortgage debt tends to command higher borrowing rates and variable payments, leaving households increasingly vulnerable to a looming uptrend in interest rates,” Cooper wrote in a report.

Household income gained 0.9 per cent, Statistics Canada said, greater than the 0.7 per cent increase in household credit market debt.

Total debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled $2.041 trillion in the first quarter. Mortgage debt represented 65.7 per cent of that, up from 65.6 per cent during the last three months of last year.

“While indebtedness has recently stabilized for Canada as a whole, it still remains elevated, leaving households particularly sensitive to rising rates,” TD Bank economist Diana Petramala said in a note to clients. “Moreover, averages do not tell the full story, with risks still rising in Ontario.”

Household net worth at market value rose 2.2 per cent to nearly $10.534 trillion. Households borrowed $27.5 billion on a seasonally adjusted basis in the first quarter, down slightly from $27.6 billion in the previous quarter.

Mortgage borrowing increased $2.7 billion from the fourth quarter to $20.9 billion, while demand for consumer credit and non-mortgage loans fell $2.8 billion to $6.5 billion.

Statistic Canada’s report came as the Teranet_National Bank national composite house price index, which measures homes sold at least twice in their history, hit a new all-time high for a 16th consecutive month. The index gained 2.2 per cent last month, the largest gain for May in the 19-year history of the index.

 

Canadian Economy Showing Encouraging Signs

Source: PR Newswire

With the adjustment to lower oil prices largely behind us, there are encouraging signs that growth is broadening across regions and sectors, Senior Deputy Governor Carolyn A. Wilkins told the Associates of the Asper School of Business in a speech June 13, 2017.

Senior Deputy Governor Wilkins discussed how having more broad-based economic growth makes it more likely that it will be sustainable over the medium term. This is the horizon Bank of Canada policy-makers consider as they set policy to achieve the Bank’s 2 per cent inflation target.

“While broad-based growth is desirable, it’s not under the direct control of monetary policy, and it’s not our objective. We target a 2 per cent inflation rate,” she said.

Senior Deputy Governor Wilkins focused on diversity in sources of growth from three perspectives: progress made in adjusting to lower oil prices, the range of industries that are growing and the evolution of the labour market.

One sign of progress in adjusting to lower oil prices is the bounce-back in capital expenditures in the oil and gas sector, which is helping to underpin renewed growth in business investment. Another comes from rising consumer demand in energy-intensive provinces. And Bank of Canada models also point to a broadening in provincial activity this year, reinforcing recent results in the Bank’s Business Outlook Survey.

“What’s encouraging is that this growth is not being driven by just a few key industries,” Senior Deputy Governor Wilkins said. The data show that more than 70 per cent of industries have been expanding and the labour market continues to improve.

However, slack in the economy is still translating into below-target inflation, Senior Deputy Governor Wilkins said, and risks to the outlook remain.

To meet its inflation objective, the Bank must consider not only current economic conditions, but also how they will evolve, she said.

“If you saw a stop light ahead, you would begin letting up on the gas to slow down smoothly,” said Senior Deputy Governor Wilkins. “You don’t want to have to slam on the brakes at the last second. Monetary policy must also anticipate the road ahead.”

 

Ontario looks at ways to make child care more affordable

Ontario is looking at ways to make child care more affordable for families in the province, announcing a framework the minister in charge calls a step toward universal child care.

A new strategy aims to increase access to high-quality child care by funding new spaces, providing more funding for licensed home child care and offering more fee subsidies for families who need them.

“This framework sets us on a path towards a universally accessible child-care system for Ontario families, one where every Ontario family that needs licensed child care can access that care, where every family that needs affordable child care can access that care and one where every family that wants quality care can get that care,” said Early Years and Child Care Minister Indira Naidoo-Harris.

She and Education Minister Mitzie Hunter discussed the framework Tuesday while announcing $1.6 billion in funding to build 45,000 new licensed spaces.

Those new child care spaces are part of a pledge of giving 100,000 more children aged four and under access to licensed child care over five years.

“We all know that child care and the right early years programs and supports play a crucial role in a child’s healthy development and lifelong success,” Hunter said. “In other words, laying a solid foundation in a child’s earliest years dramatically increases their opportunities in life and a chance for a brighter future.”

According to research from the Canadian Centre for Policy Alternatives, several Greater Toronto Area cities have the highest child-care fees in the country, with Toronto topping the list with a median fee of $1,649 a month for infants.

As part of the overall child care framework, Ontario will appoint experts to lead an affordability strategy and the province will study how it can better support early childhood educators and child care staff with compensation, hiring, retention and training.

The strategy also prioritizes the growth of non-profit child care and plans to develop a new approach for early years care for children with special needs.

The Progressive Conservatives said Tuesday that they supported the creation of more child care spaces but criticized the Liberals for not acting sooner to make daycare more affordable.

“Currently the licensed daycare sector provides spaces for little more than 20 per cent of children. The Wynne Liberals have no plan to pay for this promise, and they won’t be accountable for it until years down the road,” PC children and youth services critic Gila Martow said in a statement.

NDP early years and child care critic Catherine Fife called the government’s announcement little more than a publicity stunt.

“The Wynne Liberals announced a plan to make a plan when it comes to child care and that’s not good enough,” she said. “Parents deserve action to make affordable, quality, licensed child care spaces available right away.”

 

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